What Does Obama Win Mean for Gold Traders

November 8, 2012

What will another four years of Obama mean for Gold Traders? To start, the gold press has precious metal investors staring at or perched on a fiscal cliff, which is a familiar position for most gold bugs. This is a metaphor, of course, pointing out the fact that Washington is on the gridlock field and intends to punt the ball. With an imminent financial crisis bearing down on the U.S., analysts are expecting the president, the Congress and the Fed to paint smiley faces across the land and tell the world that everything is OK.

Despite the ebullience shining from smiley face Washington the day after the election, the S & P 500 broke though key levels and massacred defense and bank stocks. Investors who bought those shares had been hoping for a Mitt Romney win.

Nonetheless, Tim Harvey, an ETF Securities vice president, said that the election of Obama ensures a continued weak dollar that will be honky-dory for gold. With a heavy U.S. foot on the QE gas pedal, the dollar faces more years of dilution, and that’s great for gold, Harvey said.

Other possibilities with the re-election of Obama include a divided government that freezes in place and does nothing. This governance stalemate will do nothing to solve America’s financial problems, said Jeffrey Sica, an investment analyst at Sica Wealth Management. The ultimate winner, though, will be gold that investors buy when times are uncertain.

Spot Gold Prices Hit Two Week High in Trading Session

In real time, gold hit a two-week high the day after the election and held steady, hitting $1,729 per ounce. That’s still well below gold’s all-time record of $1,920 per ounce, struck in 2011.

Meanwhile, the chief analyst at the Frankfurt Commerzbank AG noted that the result of the U.S. election means that the Fed will continue monetary expansion, which exerts more pressure on the U.S. dollar that will give a boost to commodities like gold.

Gold will rack up its 12th straight year of price increases when the year ends. The price of gold has nearly doubled since Obama took office. The 24 raw materials tracked by the S&P GSCI Spot Index has shot up 85 percent since 2009. London copper and New York oil has doubled during this period.

Gold companies on the Hong Kong exchange saw wide gains after the election. Shares of gold jewelry retailers showed a strong rally as investors expected the loose U.S. monetary policies to continue, and buyers jumped into gold as an inflation hedge.

In the coming year, gold traders will likely see higher prices for the yellow metal as the reelection of Obama gave the Fed a green light to put the metal to the pedal and print more inflationary dollars.

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